Stocks Fall But AI Leaders Try To Fight; Micron, Astera Labs, Amazon In Focus

0:00Ed Carson:Trading at Schwab is now powered by Ameritrade, giving you even more specialized support than ever before. Like access to the trade desk, our team of passionate traders ready to tackle anything from the most complex trading questions to a simple strategy gut check. Need assistance? No problem. Get 24-7 professional answers and live help and access support by phone, email and in-platform chat. That's how Schwab is here for you to help you trade brilliantly. Learn more at schwab.com slash trading.

0:39Ed Carson:Good afternoon, everyone, and welcome to Stock Market Today for Tuesday, May 19th. It's Alyssa Quorum here. And stocks down on the day as this power trend pullback continues, but leading AI stocks are trying to fight back. We will detail that and more. I'm joined now by my colleague Ed Carson with details. Zed? Yeah, I want to take a look at Micron Technology, Estera Labs, and Amazon. Okay, we'll take a look at those stocks. But first, let's take a closer look at the major indexes to talk about the performance there. So the NASDAQ down eight-tenths of a percent on the day. Small caps were the hardest hit index today, though, with small caps down a little over 1 % or so.

1:28Ed Carson:Meanwhile, the S &P 500 down 7 tenths of a percent on the day, a key level we're watching there we'll discuss shortly. And the Dow down about 6 tenths of a percent on the day. Also want to take a quick look at that 10-year treasury yield here, Ed, continuing to spike higher. So So explaining that weakness or outsized weakness in the small cap area. Your thoughts on this pullback taking shape? First, three days down since this market rally, Ed. Yeah, there is a bit of a change in character. And it could end up great. We could look back on and say, oh, we paused for a few days or a few weeks. And then we ran again.

2:12And everybody, of course, knew to be heavily invested. But you don't know that right then. I mean, we're still in a power trend. All the moving averages are still moving higher and all those things. Maybe we just have an orderly decline. Maybe an orderly decline to the 21-day line and then we take off again. We'll see about from there. So, yeah, this is where you start thinking, do you take some offensive selling or do you hold for longer? But have those rules in place. Where do you want to do that? You don't want to say, well, I'm going to go all the way down to the 50-day line. That would be a long way to go.

2:42That would be a huge chunk of the rally. So you just have to decide on things, on individual stocks in your portfolio. how do you want to handle things? And there's not a right answer. We're still, we'll have a huge run. Anybody who bought on the follow through day when we first gapped up above the 50 day line has made a lot, you know, just off of, you know, just buying the market. So, you know, you want to try to hold for longer, but you, you just have to be balancing that, making sure that your gains aren't going away. And we did see some AI stocks move up and we'll look at some names that did go up.

3:13So maybe, You know, it's, you know, that was a positive sign for the market rally.

3:19Ed Carson:Buyers coming in there. And I just want to quickly highlight that our senior market strategist, Mike Webster, said that his base case for a pullback in this power trend is two and a half to three and a half trading days. So I think at this point, it's been three days. So first half of the day tomorrow. And again, that's base case. That's not crystal ball prediction. that's if we were to see something normal, that would be the expectation. So maybe a little bit more weakness tomorrow and an upside reversal would be ideal. Let's also take a look at where the NASDAQ composite is versus the 21-day line, which is key to our market school rules.

3:59Ed Carson:And this power trend was the featured topic of a webinar that you and I did yesterday afternoon, Ed. So we're 1.8 % below the 21 day. Even intraday, that would be a pretty big hit, but not out of the question. And it's not like we have to come right down to that level exactly and touch it and beautifully bounce, but just sort of a frame of reference to a pullback around that level. It is in striking distance there. So some sort of upside reversal tomorrow, I think, would be ideal for growth investors in this power trend market. We'll see if that's what we get. We did see, as you mentioned, some upside reversals today in individual stocks.

4:44Ed Carson:Also want to highlight a reversal day low that we've been watching very closely, and that is the low from 512. We did undercut that intraday here, Ed, but managed to close above it on the NASDAQ. Let's check out the S &P 500. It's pretty close. I did draw that line there. So we're roughly around a key reversal area. Do we undercut and get an upside reversal tomorrow? We'll have to see, but that's what we're looking for. I think if we see more damage, then that next level would be a test of the 21 day if we continue to fall. And just one point, tomorrow will be interesting, but I think that you have to take all of it, good or bad, with a grain of salt, because we have NVIDIA earnings tomorrow night.

5:32So especially the S &P and NASDAQ, and then have to wait to see how that goes. That'll just be so huge for the market.

5:41Ed Carson:It very well could be. I will say, though, a number of quarters where, and it's so unique because NVIDIA doesn't report when all of the other major tech bellwethers report, right? But I feel like there have been past quarters where investors, including myself, are looking for NVIDIA to quote unquote save the day. Yeah. And it doesn't really happen. But I feel like we are at this renewed moment of the AI hype cycle. So this quarter could be different. Yeah, yeah. They've definitely had some negative reactions. I mean, NVIDIA, it'll be really important. It's potentially very important. I think it's sort of like one of those hold your breath moments and it may end up great.

6:27It may be terrible. And other stocks may go like, eh, you know, to NVIDIA. So you're right. But a lot of big flurry of news over the next couple of days. Yeah, with that potential.

6:38Ed Carson:Okay, so those are the key levels that we're watching. And just because we're down a couple of days doesn't mean that we are suggesting investors should be running for the hills. Like you said, it depends on your strategy. Are you locking in some profits, looking at key shorter term moving averages to do so? Or are you taking a step back, looking at the weekly chart, trying to ride the gains from the follow through day like you were talking about, Ed? So I think if we break the 21 day in a material way, then I think it's at that point that we would be concerned. But for now, it does appear that this pullback, if you study past power trends, which we have been on our Friday Stock Market Today video every Friday since really we've had the follow through day, if not earlier, we've been looking at past examples.

7:34Ed Carson:And pullbacks aren't normal in a power trend. Pullbacks are healthy and they create buying opportunities. So trying to take that approach unless we get some sort of material breach of that Q level. I completely agree. All right. Moving on, Ed, let's get your quick thoughts on what we're seeing out there with blue chips and small caps. Let's start with the Russell. Yeah. I mean, that's now, this is at a key area. I mean, it's through the 21-day line. That was clear yesterday. And now it's testing the top of that prior little sort of base. And that's important. You know, like I think that would be concerning.

8:17If this were the market, we'd be pretty concerned. You know, if this was the S &P and the NASDAQ, this would not be great. And you can see it's just been weakening. A lot of the market has been the AI, big AI names, mega caps and other things. And the small caps have not done very well. And you're right. You mentioned the treasury yields and other things, probably pressuring a lot of these names. The 10-year yield hit its highest level since February, I think, or February 2025. And I think the 30-year yield hit a 19-year high, or the highest in almost 19 years. And that was pressure. That means higher borrowing costs for the companies and for consumers.

8:54You know, it's not the end of the world. We've been higher. But that's been a pretty big, dramatic move over the last several days and something to watch out for. Yeah. And a big move this year. right? Yeah. Big move this year. And some of that's a positive. I mean, if you think, hey, the economy is better than you think, et cetera. But a lot of this has to do with oil prices. So that's something out there. And USO was sort of interesting. Oil prices technically fell a little bit, but really they didn't because depending from a stock market's perspective, from 4 p.m. to 4 p.m. they didn't fall.

9:30And USO, which is an ETF, gives you more of that sense. It's basically stayed actually rose in many ways. So I think that's another thing from that perspective, 4 p.m. to 4 p.m. out there.

9:44Ed Carson:Yeah. Well, the spirit of an ascending base here almost, Ed. Yeah. And there's a lot of things that could happen with this. And that's the thing you don't know. And you just have to wait for the market reaction. You say, well, I think oil prices are going to do this. There's a lot of scenarios where oil could go to 200. You could see oil coming down to 75. And those things could happen very rapidly either way. So you just have to wait and see what the market does. But yeah, I don't like an ascending base in oil prices. Yeah. Okay. Let's go to some sector action. Here's a look at IGV. This is the software area, a downside reversal today, but we have seen some improvement off the lows from early April.

10:26Ed Carson:What are your thoughts on this. Yeah. I mean, in some cases, well, IGV would be nice to get above the Tunity line and a lot of those names. But yeah, some of the leading names, if they could, that it actually made moves, pauses would actually be nice after some big moves. But it's been nice to see software come back. And I guess I'm not that concerned with this after such a nice move. Yeah. Let's go to the chips here's smh i mean we've just been talking a lot about the eye-popping run and historic in many ways that the chip sector has had we did on monday finally get a close below the 10-day line so a potential profit taking area is that something you opted to do ed i know you've been trading smh yeah i'd really just let it ride because it's the the atr isn't that bad i mean When you think about all the really high, some of the names in AT &T are really high octane, but it's not that much.

11:23And I decided I'm going to let it ride to below the 21-day line before taking any partial profits. And it held support. I was watching it, but it held for now. So we'll see.

11:34Ed Carson:Yeah. Yeah. Really nice close off the lows there. Let's see what the closing range was. We have that on our track price tool, 63%, so well within the upper half. So some nice supporting action there today. All right. And then just quick thoughts on the Dow since I did bring that up. I sort of subtracted. Yeah, it found support of the 21-day line, which is like, obviously, this isn't leading. It's not as critical, I think, as these growth areas. But yeah, I mean, it's just this is lagged. You know, it never broke out. It never really broke out. So this is a laggard area. You really wouldn't want this to take off.

12:12If this took off, that might be a real negative, the relative strength line. might be a real negative sign for the rest of the market. But it's still hanging on. This is the laggard, and it's still hanging on to the 21-day line. So it's not that bad.

12:25Ed Carson:And let's also quickly get some color on RSP. This is the equal weight S &P 500 ETF. Honestly, kind of similar action to the Dow. It didn't break out. We're now below the 21-day. So this is your average S &P 500 stock, Ed. at the same time, it wouldn't take much to get us in that new high territory. Yeah, exactly. I mean, it's near highs, it's lagging, you know, so it's, which is good. If you want your laggers to be near highs. I mean, honestly, there's worse things. I think QQQE is interesting because some of the mega caps were down today and they weren't terrible, like, you know, Google, Meta, and Amazon, they were all down a little bit.

13:07But, you know, it's just that weight on it, but the QQQE is looking very strong. It's just barely above the 10-day line, didn't fall that much today at all. So there's some underlying strength. I mean, some of the chips, some of the AI names came up, some of the software didn't do that badly. So this shows you some underlying strength in the tech field for sure.

13:27Ed Carson:Exactly. And I think the thing to remember is with the very powerful trend that we've seen since that April 8th follow-through day. It's been hard unless you were getting in in those early days. Recent buys have been tricky. A lot of the leaders have been extended. So this pullback could be very constructive with the formation of new buying opportunities, new setups. And if you're someone who really likes buying when the market is also in an ideal position versus extended, then that is something that we could see as well. I think that that's also helpful because over the last number of weeks, we've seen setups, maybe more aggressive type entries, not your traditional buy points with stocks around the 50-day, but we have seen setups.

14:22Ed Carson:But the timing with where the market has been, which has gotten kind of ahead of itself, has made those recent buys a little tricky. So I am still cup half full or maybe even more than half full on this on this pullback here for the market. And let's take a look at some. We're the Hartford with decades of experience insuring millions of unique small businesses. When it comes to your small business insurance. Thank you. One size absolutely does not fit all. Get a quote or find an agent today at thehartford.com slash smallbusiness. Examples of some of the leaders in the action today. Here's Micron reversing higher on the day, up about two and a half percent.

15:07Ed Carson:Didn't touch the 21 day, but not all pullbacks to the 21 day, again, have to be exactly at that level. It also doesn't mean that the pullback year is over necessarily, but it was good to see, Ed, this upside reversal, especially given the outside day downside reversal from the session before. Yeah. And so there's sort of three things you could see with some of these names. And I actually think I've looked at Sandus too many times, and I think so, but Sandus may be a little bit more gradual. This one's pretty abrupt in three days. But I could imagine here there's three things. It could rebound quickly.

15:46it could reverse again and sell off. Or maybe this is the beginning of a base building kind of thing or kind of, or a gradual thing. And it's like, I think like in military terms, when you talk about, okay, we got to retreat, but you have forces that do rear guard action. So it doesn't become a route. You know, even if this continues to fall, you don't want to see, we talk about bases. You don't want to see the left-hand side of that base just look like, you know, like a free fall. So let's say this falls and maybe it even falls all the way to the 50 day line gradually. I'm not saying it does that, but you can imagine that scenario, you know, around 600 or say over time.

16:21And it's like, okay, that looked pretty orderly. It's not fun if you owned it at 800 and it comes down to 600. And you may need to take, you might decide that violated some sell rules, blah, blah, blah. But that's in the other scenario. So we don't know what's going to happen. It's right between the, you know, sort of between the 21 and the 10 day line. It's, you know, nice to see some fight that we're not just continuing to fall and that it outperformed the market, you know, like some nice things that happened after a few bad days for a lot of these AI leaders.

16:51Ed Carson:Exactly. So I like that, you know, what's the best case scenario that could happen here? The base case, the worst case, and even in the quote unquote worst case, it could still be in a somewhat normal base. Absolutely. You know, that could form here. So we'll have to see if that happens for Micron. And so speaking of NVIDIA earnings, potential ripple effect across AI stocks, you think, Ed, should Micron investors be gearing up for, you know, on edge with this NVIDIA report? coming out. Yeah, and I think a lot of these chips use a lot of, a lot of the AI chips in NVIDIAs use a lot of memory. So it's hard to, I'm not comfortable, I don't know how it all plays out.

17:42I've obviously said, if NVIDIA says good, you know, that's probably good for AI, but I don't know how it plays for specific companies or themes within there. Some might be negative. Like if NVIDIA says everybody wants the raw GPUs, well, Broadcom might sell off on that. You know, these custom chip makers. I have no idea. But yeah, you definitely should be watching that. You know, There's a Samsung strike that could happen. So maybe a big rival loses that. So yeah, there's a lot of news that could come out on that. But yeah, NVIDIA, that's why it's just really important. There's a lot of potential things they could say about demand, about supply constraints.

18:19And memory, I think, will be an important topic for NVIDIA. Great.

18:24Ed Carson:Okay, well, let's take a look at a semiconductor named Astera Labs. had a very strong day today, Ed, up over 13%. I'm going to zoom out on the chart a little bit. We did see some prior resistance cleared. So back last fall around the 230 level, we saw some resistance as it came up the right side of the base in recent days. Today, clearing that in a pretty significant way, increased volume behind the move today. Now we just have a little bit to go until this stock is in new high territory. So a very powerful move out of this double bottom base that it cleared shortly after the follow through day.

19:14Yeah. And there was some positive news. They had conference, you know, like they were speaking at the JP Morgan Global Technology Media and Communications Conference. And I guess they said positive things because the market really took off. This was up like 2 % during IBD Live. So it really got going. And maybe this was one reason why AI stocks rebounded in general. I don't know. There was a big move that really came in. It just kept on going. I mean, it wasn't. It just built and built. But, yeah, I mean, on the daily chart, I mean, I sort of see it. There was a cup base at 192, and that was basically that.

19:50And so you could treat this as sort of in that first line that you had drawn previously around to. Yeah, right there. There's that resistance. And I could sort of see it's a recent action as a high handle to the cup base or as a handle to this larger consolidation. However, you want to look at it. So I think today would have been a breakout. I mean, it was, you know, you would have needed to pay attention to it. This has a high ATR. This could easily fall 9 % tomorrow. You know, it could fall a lot. And there's always that issue that NVIDIA's earnings could be important because I think there's concerns.

20:20Oh, could NVIDIA take over this market or, you know, those kind of things. That's one reason why I think the stock has been so volatile is because people see the growth. They see this huge market. But there's also these threats out there. I don't know how valid those threats are, but really strong move. I mean, 13 % when the market is down and a lot of AI stocks were down and some rebounded, but nothing moved like this. This was probably the stock of the day in that regard. You know, just really, really impressive move.

20:50Ed Carson:Yeah, very powerful. So can you continue to watch this one, see if it settles down a little bit? Because like you said, it's been kind of volatile. It does have powerful growth. And I think that that 250 level in the prior high at 262.90 are going to be key resistance areas to watch. But I'd like to see this stock settle down a little bit before I think about it. Yeah, we haven't gotten that. Okay, let's take a look at something a little slower. Amazon's ATR 2.6%, down about 2 % on the day. It did close off the lows. Let's see what the closing range was for this stock. Ed, looks like it was at 59%.

21:38Ed Carson:So some supporting action there as well. But we were talking about the setup off of the 21-day line in Monday's session. That did not work. You know, for traders who were hoping for a little bit of a bounce, we haven't quite seen that yet. But maybe this pullback to the prior breakout area is what this stock needs before it can move higher. Yeah, it made a really big move. And the thing is, this base wasn't that good looking and the RS line wasn't that strong heading into it. So sometimes what happens is you have sort of, you know, let's say an ungainly bases or deep bases, and then they move and then they form bases or high handles or like around the top of the prior base.

22:23So maybe that's what happens here. I mean, that could, if you have a tight little base here, the relative strength line's in a little better position than it was maybe the last time, that might be the lower risk situation than the prior base, which again, you know, made a really strong move. There was a lot of positive news, a lot of reasons why it moved. But yeah, I mean, I think, yeah, you could see this bounce off the buy point or use that trend line again or use yesterday's high. Those are all things. And maybe this is a situation I don't usually do it, but if I were to do it, this might be one because these are all so close together where I buy, buy, buy, like, you know, like buy at these various points, buy on the bounce, buy on the trend line, buy on getting above yesterday's high, which is around the 10 day line as well.

23:05So those would be things that could be out there. So, yeah, well, again, NVIDIA earnings are important because Amazon's move in large part has been about it touting its in-house chips. So if NVIDIA's comments are positive for Amazon, that's important. And I'll also note that Marvell will have comments that's relevant because Amazon teams up with Marvell for those in-house chips. And Marvell will have earnings next week. So there's always, with all these companies, there's always an earnings report that affects these things. But that's just something. But, yeah, I think Amazon looks pretty good.